Federalism in India

Legislative powers

The power of the states and the Centre are defined by the constitution and the legislative powers are divided into three lists. i.e.

Union List

Union List consists of 100 items (previously 97 items) on which the parliament has exclusive power to legislate including: defence, armed forces, arms and ammunition, atomic energy, foreign affairs, war and peace, citizenship, extradition, railways, shipping and navigation, airways, posts and telegraphs, telephones, wireless and broadcasting, currency, foreign trade, inter-state trade and commerce, banking, insurance, control of industries, regulation and development of mines, mineral and oil resources, elections, audit of Government accounts, constitution and organisation of the Supreme Court, High Courts and union public service commission, income tax, custom duties and export duties, duties of excise, corporation tax, taxes on capital value of assets, estate duty, terminal taxes.

State List

State List consists of 61 items (previously 66 items). Uniformity is desirable but not essential on items in this list: maintaining law and order, police forces, healthcare, transport, land policies, electricity in state, village administration, etc. The state legislature has exclusive power to make laws on these subjects. But in certain circumstances, the parliament can also make laws on subjects mentioned in the State list, then the Council of States (Rajya Sabha) has to pass a resolution with 2/3rd majority that it is expedient to legislate on this state list in the national interest.

Though states have exclusive powers to legislate with regards to items on the State list, articles 249, 250, 252, and 253 state situations in which the federal government can legislate on these items.

Concurrent List

Concurrent List consists of 52 (earlier 47) items. Uniformity is desirable but not essential on items in this list: Marriage and divorce, transfer of property other than agricultural land, education, contracts, bankruptcy and insolvency, trustees and trusts, civil procedure, contempt of court, adulteration of foodstuffs, drugs and poisons, economic and social planning, trade unions, labour welfare, electricity, newspapers, books and printing press, stamp duties.

Residuary Subjects

The subjects that are not mentioned in any of the three lists are known as residuary subjects. However, there are many provisions made in the constitution out side these lists permitting parliament or state legislative assembly to legislate. Excluding the provisions of the constitution out side these lists per Article 245, the power to legislate on residuary subjects (not mentioned any where in the constitution), rests with the parliament exclusively per Article 248. Parliament shall legislate on residuary subjects following the procedure per Article 368 as constitutional amendments.

In case the above lists are to be expanded or amended, the legislation should be done by the Parliament under its constituent power per Article 368 with ratification by the majority of the states. Federalism is part of the basic structure of the Indian constitution which cannot be altered or destroyed through constitutional amendments under the constituent powers of the Parliament without undergoing judicial review by the Supreme Court.

Executive powers

The Union and states have independent executive staffs fully controlled by their respective governments and executive power of the states and the Centre are extended on issues they are empowered to legislate. As in legislative matters, in administrative matters also, the Central government can not overrule the constitutional rights/powers of a state governments except when president rule is promulgated in a state. It is the duty of the Union to ensure that the government of every State is carried on in accordance with the provisions of the Constitution per Article 355. Article 256 of the Constitution has made it clear that the State governments cannot go against the Central laws in administrative matters. When a State has failed to work according to the Constitution, President’s rule is imposed under Article 356 and President takes over its (the State’s) administration with post facto consent of the Parliament per Article 357.

Financial powers

Article 282 accords financial autonomy in spending the financial resources available with the states for public purpose. Article 293 gives liberty to states to borrow without any limit to its ability for its requirements within the territory of India without any consent from the union government. However union government can insist for compliance of its loan terms when a state has outstanding loan charged to the consolidated fund of India or an outstanding loan in respect of which a guarantee has been given by the Government of India under the liability of consolidated fund of India.

President constitutes a Finance Commission after every five years to recommend the modality for devolving union government revenues between central and state governments.

Under Article 360 of the constitution, President can proclaim a financial emergency when the financial stability or credit of the nation or of any part of its territory is threatened. However, until now no guidelines defining the situation of financial emergency in the entire country or a state or a union territory or a panchayat or a municipality or a corporation have been framed either by the finance commission or by the central government.

Such an emergency must be approved by the Parliament within two months by simple majority. It has never been declared. A state of financial emergency remains in force indefinitely until revoked by the President. The President can reduce the salaries of all government officials, including judges of the Supreme Court and High Courts, in cases of a financial emergency. All money bills passed by the State legislatures are submitted to the President for approval. He can direct the state to observe certain principles (economy measures) relating to financial matters.

Disputes with union / other states

States can make agreements between themselves without violating applicable laws in respective states. When a dispute arises with another state or group of states or union territory or central government, Supreme Court shall adjudicate in such disputes per Article 141 of the constitution. However Article 262 excludes Supreme Court jurisdiction with respect to adjudication of any dispute in the use, distribution or control of the interstate river waters per Article 262.

Under Article 263, President can also establish an interstate council for serving the public interest to coordinate / resolve the disputes between states and the union and for better implementation of policies.

Jammu & Kashmir state

The state of Jammu and Kashmir has separate set of applicable laws under Article 370 read with Appendix I & II {The Constitution (Application to Jammu and Kashmir) Order, 1954} of the Indian constitution. Only matters related to defence, foreign relations and communications of Jammu and Kashmir are under the jurisdiction of union government. The laws enacted by the parliament (including amendments to the Indian constitution) applicable to rest of India are not valid in J&K state unless ratified by its state assembly. Government of India can declare emergency in Jammu and Kashmir and impose governor's rule in certain conditions. The state has its own constitution other than applicable Indian constitution. Part XII of the J&K state constitution makes provision to amend its constitution with two thirds majority by the state assembly. Part VI (The states) and Part XIV (Services) of the Indian constitution is not applicable to J&K state per Article 152 and Article 308.

Criticism and issues

The Government of India Act 1935 aimed to establish India as a Federation of States. It emphasized division of powers, independent and apolitical Governors and Governor-Generals and introduced provincial autonomy for the first time in India. On 26 January 1950, India adopted a new constitution.

Article 1 of the constitution says India shall be union of states and its citizens shall have at least two tier governance. However, Article 3 grants the union government exclusive power to (a) form a new state by separating a territory of any state, or by uniting two or more states or parts of states, or by uniting any territory to a part of any state. (b) the power to establish new states (which were not previously under India's territory) which were not in existence before.

The appointment of Governor of States in India is vested with the President but only on the advice of the Union Government. The governors of states are generally not residents of the state.

In the case of a breakdown of constitutional machinery in a state, Article 356 brings about state emergency which dissolves the state government and results in President's rule during which the Union Government can make laws for a state. There is no emergency at the centre which can dissolve the union government unlike Government of India Act 1935. Misuse of Article 356 was rampant in the decades following the adoption of the new constitution especially during the prime ministry of Indira Gandhi. In 1991, Supreme court passed a landmark judgement which acknowledged misuse of the article and laid down principles for the union government to follow before the state emergency can be invoked.

The Lieutenant Governors of Union Territories of India are designed as administrators and are once again appointed by the President on the advice of the union government. These Lieutenant Governors can override policies made by the local government.

States are at liberty to manage their finances as long it is not leading to financial emergency per Article 360. Instead GoI is trying to impose uniform taxation laws throughout India and trying to take over of tax collection mechanism of states without regards for the positive and negative inherent aspects of each state which are to be addressed by each state from time to time. Recently Supreme court upheld the constitutional right of states to impose Entry Tax which is against the principle of GST.

Control of industries, which was a subject in the concurrent list in the 1935 act, was transferred to the union list. The union government in 1952 introduced the repulsive Freight equalisation policy which resulted in the resource drain and backwardness of a number of Indian states. The sufferers of this policy were the states of West Bengal, Bihar (including present-day Jharkhand), Madhya Pradesh (including present-day Chhattisgarh) and Orissa. These states lost their competitive advantage of holding the minerals, as the factories could now be set up anywhere in India. This was not the case in the pre-independence era, when the major business houses like the Tatas and the Dalmias set up industries in these states, and most of the engineering industry was located in the state of West Bengal. Even after the removal of the policy in the early 1990s, these states could not catch up with the more industrialised states. In 1996, the Commerce & Industry minister of West Bengal complained that "the removal of the freight equalisation and licensing policies cannot compensate for the ill that has already been done".

GoI laws permit a private / public limited company to raise loans internally and externally to its capacity based on its performance/repayment reputation. Whereas states are unconstitutionally limited by the GoI to limit the borrowings when they have not defaulted / led to financial emergency. The employees salary and pension expenditure of many state governments are exceeding their total revenue, but no financial emergency by the President is imposed to restrict the expenditure for enhancing the productivity of the government employees. Article 47 of Directive Principles of the state policy stipulates prohibition of intoxicating drinks which are injurious to health but it is not imposed even after the constitution is adopted 65 years ago. In contrary, many states promote liquor sales exponentially and collect major chunk of their tax revenues from liquor sales for meeting expenditure on developmental works.

GoI is devolving central funds to the states under specific identified schemes (like NREGA, etc.) whose implementation by the states is subject to the satisfaction of the GoI which is highly controversial and against Article 282.